Edison, H., and Macdonald, R. (2002) Aggregate and disaggregate measures of the foreign exchange risk premium. International Review of Economics and Finance, 11 (1). pp. 57-84. ISSN 1059-0560 (doi:10.1016/S1059-0560(01)00096-X)
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Recent proposals for reforming the international monetary system often focus on a target zone arrangement for the dollar, euro and yen. Theoretical research suggests that a credible target zone confers on a participant some short-run discretion in the setting of interest rates, and recent empirical research suggests that this was indeed the case for the Classical gold standard, perhaps the best example of a credible target zone. In this paper we examine the extent of short-run interest rate discretion (SRID) conferred by another experiment with target zones, namely the ERM experience. Amongst our findings is the result that countries that had a credible commitment to the ERM did indeed have SRID.
|Glasgow Author(s):||MacDonald, Prof Ronald|
|Authors:||Edison, H., and Macdonald, R.|
|College/School:||College of Social Sciences > Adam Smith Business School > Economics|
|Journal Name:||International Review of Economics and Finance|